Volume Tutorial:
Volume
Analysis
Technical analysis is a very powerful tool and is
a prerequisite for anyone who wants to predict financial market
movements. The term "technical analysis" is a complicated-sounding name
for a very basic approach to investing.
Simply put, technical analysis is the study of prices,
with charts being the primary tool. So while it seems as if volume and
technical analysis in general all have some forecasting abilities, none
are foolproof. Used together, they can be quite helpful in your trading
and investing, but should be seen, more than anything else, as helpful hints
indicating a bias in the market.
Technical analysis attempts to use past stock price and
volume information to predict future price movements. It doesn't look at
income statements, balance sheets, company policies, or anything
fundamental about the company. The technical form of analysis looks at the
actual history of trading and price in a security or index. This is
usually done in the form of a chart. The security can be a stock, future,
index, or a sector. It is flexible enough to work on anything that is
traded in the financial markets.
Here are a few Technical Analysis Tips that you should
remember before starting your own analysis:
-
Technical
analysis is not an exact science. It's an art and takes considerable
experience. Not all studies work the same for every instrument traded.
One study may give excellent buy and sell signals while another may not
work for you at all. It's up to each individual trader to find those
that will fit his or her specific needs.
-
Every
technical analyst knows the importance of charts and indicators.
But if these were all it took to make profitable trading decisions,
everyone would be a winner.
-
With most
indicators it is possible to detect buy and sell levels. The point is to
detect them before everybody else.
-
Analyze
market data in real time.
-
Plan your
own Market Timing strategy to make money, regardless of upward or
downward trending markets.
-
Study
charts often (daily if possible).
-
Do be
careful with free advice from internet and media sources! Do not
buy hot tips! Sometimes people are trying to manipulate
individuals to buy the securities that they own in their own portfolios.
They want to drive up the price and then they will sell off. You will
only lose money in the long run. Do your own analysis and stay away
from hot tips!
-
Minute-by-minute trading volume shows the reversal points of the market,
and therefore when to buy and sell!
Be sure that you have modern professional tools to
predict the market. Otherwise you are running behind the times and your
portfolio will become food for other successful professional traders.
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